Buying a home can be complicated. Prequalification simplifies it. The process gives you guidance when shopping for your future home. While a prequalified mortgage does not guarantee a loan, there are several benefits for you, the borrower.
However not all Prequalification’s are the same
A quick prequalification is when you provide your income and estimated expenses and then you are provided with an estimated price you can purchase for.
However, an in-depth prequalification is when an originator evaluates how much house you can afford based on a simulated application process. Lenders see if you meet the minimal requirements for a loan, and how big the loan should be. Prequalification is ideal for people who are considering homeownership but who are not necessarily committed, whilst doing an in-depth prequalification will provide you with the a more accurate number.
It involves some of the same steps as prequalification, though borrowers have to submit financial documents. One stipulation is that borrowers must carry out a credit check. Originators review the information for a more precise idea of the amount home borrowers can afford.
What Are the Benefits of Prequalified Mortgage?
IT SETS A CLEAR BUDGET
When you are looking for a home, it is easy to get carried away at looking at homes which are actually out of your price range. Prequalification keeps those urges in check. While you can still borrow the maximum amount, prequalification sets a realistic expectation for your budget.
During prequalification, a lender will give you a range for how much home you can afford. That way, you can stay within the estimate while house hunting. Remember, a mortgage payment is one part of a budget. Make sure you feel comfortable with the loan amount before proceeding.
IT SHOWS SELLERS YOU’RE SERIOUS
Whether you are a home buyer or a seller, no one wants to waste their time. Getting prequalified demonstrates to sellers that you’re serious about home buying. In some cases, realtors will insist on seeing a prequalification letter before showing you a home.
IT IS EASIER THAN PRE-APPROVAL
Prequalification is simpler than preapproval. While both processes take one to three days, prequalification does not require as much paperwork. In most cases, a lender only needs your credit report and some bank statements. Loan preapproval is a more in-depth process, and requires evidence of debts, liabilities, other assets, and tax returns.
IT SAVES TIME
The average homebuying process takes anywhere between three to six months. Loan prequalification lets you chip away at that number. For instance, having an estimate for your loan’s value will keep you from looking at unnecessary houses. When it comes to negotiating with sellers, you will have a sturdier position knowing your budget, too.
Additionally, prequalification streamlines homebuying. The process requires you to get your papers in order in advance. It also gives you the chance to review and dispute any errors on your credit report or financial documents.
What Do Originators Look for During Prequalification?
Prequalification takes into account several factors, ranging from credit profile to gross income. While each Originator has a slightly different way of calculating qualification, here is the essential information you’ll need:
Proof of employment
Monthly debt payments
Ideal mortgage term and interest rate
Records of Insolvency
How Do I Get Prequalified for a Mortgage?
Prequalification is the first step in the homebuying process. A word of caution, many online offerings and “do it yourself” pre-qualification tools are not accurate pre-qualifications but rather affordability calculators.
A true prequalification entails a fair amount of work and requires paperwork, a good bond originator or consultant can assist you in the process, they will assist you with:
Checking your credit scoreLooking for defaults against your name
Advise on the likelihood of approval
Fix any errors in your documentation and application
Identify your marriage status and advise on possible outcomes
Advise on self-employed vs salaried requirements
Discuss possible products that would suit first time buyers
Provide you with an accurate amount you can purchase for
Discuss the hidden costs of buying a property
The Bottom LineIf home buying feels overwhelming, prequalification can make it more manageable. When you do a prequalification just using a calculator you are not taking into account your credit score, changes in your income and expenditure, bank polices that influence deposit requirements and the particular requirements of individual banks and lending institutions.
Prequalification gives home buyers a way to estimate how much home they can afford while simplifying the mortgage loan process.
Contacting a bond originator to assist you with a true prequalification process is about giving an identity to what otherwise is just another application. You do not get lost in a system, there is a champion representing you, and ensuring that you get the best deal.
Given that this is a free service, the use of this service is often a best-kept secret. By partnering with a consultant from MultiNET you will be free to zero in on your perfect house sooner rather than later